Case Note & Summary
The Applicant, Drive India Enterprises Solutions Ltd., is the Judgment Creditor in a decree dated 10th September 2018 against the Judgment Debtor, Haier Telecom (India) Pvt. Ltd. The decretal amount was Rs. 64,11,78,970.50 with interest. The Judgment Debtor failed to pay, leading to a Commercial Execution Application. During proceedings, the Applicant discovered that the Judgment Debtor had advanced Rs. 17,40,82,984/- to the Respondent, Olive Global Holding Pvt. Ltd., as per the Judgment Debtor's provisional balance sheets for FY 2017-18, 2018-19, and 2019-20. The Respondent's own financial statements for the year ended 31st March 2023 also reflected this amount as a liability under Note 5. Additionally, the Director of the Judgment Debtor, Mr. Rajesh Duggal, admitted in cross-examination on 1st September 2021 that the sum was due and recoverable from the Respondent. The Applicant filed an Interim Application under Order XXI Rules 46 and 46A CPC seeking attachment and deposit of the amount. The Respondent opposed, claiming that the amount had already been paid to a third party, HT Media, in 2012 for subscription of shares, and that the entries were merely book entries. The Court noted that the Respondent is a 49.90% shareholder of the Judgment Debtor, and Mr. Arun Khanna is a common director and promoter of both entities, with 80% shareholding in the Respondent. The Court found the transaction circuitous and collusive, aimed at defeating the Applicant's claim. The Court held that the acknowledgment in the balance sheets constituted an admission of liability, and the Respondent failed to raise a real dispute. Relying on Asset Reconstruction Company (India) Limited v. Bishal Jaiswal and Mackinnon Mackenzie and Company Pvt. Ltd. v. Anil Kumar Sen, the Court allowed the application, directing attachment and deposit of Rs. 17,40,82,984/- into Court.
Headnote
A) Civil Procedure - Garnishee Proceedings - Attachment of Debt - Order XXI Rules 46 and 46A, Code of Civil Procedure, 1908 - The Court considered whether a garnishee order could be passed against the Respondent who allegedly owed Rs. 17,40,82,984/- to the Judgment Debtor. The Applicant-Judgment Creditor sought attachment and deposit of the amount into Court. The Court held that acknowledgment of debt in balance sheets of both the Judgment Debtor and the Respondent constitutes an admission of liability, and the Respondent failed to raise a real dispute. (Paras 1-8)
B) Civil Procedure - Garnishee Proceedings - Real Dispute - Rule 46-C, Order XXI, Code of Civil Procedure, 1908 - The Court examined whether the Respondent's claim that the debt was already paid to a third party (HT Media) in 2012 constituted a real dispute. The Court held that the transaction was circuitous and collusive between related parties, and the Respondent did not discharge the onus of establishing a valid dispute. Therefore, no trial was required under Rule 46-C. (Paras 6-9)
C) Evidence - Acknowledgment of Debt - Balance Sheets - The Court relied on Asset Reconstruction Company (India) Limited v. Bishal Jaiswal and Bengal Silk Mills Co. v. Ismail Golam Hossain Ariff to hold that an acknowledgment of liability in a balance sheet can amount to an acknowledgment of debt. (Paras 4-5)
Issue of Consideration
Whether the Respondent-Garnishee owes a sum of Rs. 17,40,82,984/- to the Judgment Debtor, warranting attachment and deposit under Order XXI Rules 46 and 46A CPC, and whether there exists a real dispute requiring trial under Rule 46-C CPC.
Final Decision
The Court allowed the Interim Application, directing attachment and deposit of Rs. 17,40,82,984/- into Court under Order XXI Rules 46 and 46A CPC. The Respondent was directed to deposit the amount within four weeks.
Law Points
- Garnishee proceedings
- Order XXI Rules 46 and 46A CPC
- acknowledgment of debt in balance sheets
- real dispute test under Rule 46-C CPC
- siphoning of funds by related parties
Case Details
2024 LawText (BOM) (11) 1103
Interim Application No. 3099 of 2021 in Commercial Execution Application No. 849 of 2019
Mr. Sarosh Bharucha with Ms. Sneha Jaisingh, Mr. Yash Arora and Ms. Janhavi Sakalkar i/b Bharucha and Partners for the Applicant; Mr. Akash Rebello with Mr. Nadeem Shama, Mr. Hubab Sayyed and Mr. Paras Gosar for Respondent
Drive India Enterprises Solutions Ltd.
Haier Telecom (India) Pvt. Ltd. and Olive Global Holding Pvt. Ltd.
Subscribe to unlock Case Details (Citation, Judge, Date & more)
Subscribe Now
Nature of Litigation
Interim Application in Commercial Execution Application seeking garnishee order against Respondent for attachment and deposit of amount owed to Judgment Debtor.
Remedy Sought
Applicant (Judgment Creditor) seeks an order directing Respondent (Garnishee) to deposit Rs. 17,40,82,984/- into Court under Order XXI Rules 46 and 46A CPC.
Filing Reason
Judgment Debtor failed to pay decretal amount of Rs. 64,11,78,970.50 with interest; Applicant discovered that Respondent owed Rs. 17,40,82,984/- to Judgment Debtor as per balance sheets and deposition.
Previous Decisions
Decree dated 10th September 2018; order dated 11th March 2020 directing Judgment Debtor not to dispose of assets; Chamber Summons for disclosure; oral examination of Director on 1st September 2021.
Issues
Whether the Respondent owes Rs. 17,40,82,984/- to the Judgment Debtor, warranting garnishee order under Order XXI Rules 46 and 46A CPC.
Whether there exists a real dispute requiring trial under Rule 46-C of Order XXI CPC.
Submissions/Arguments
Applicant: The amount is admitted in balance sheets of both Judgment Debtor and Respondent; Director admitted debt in cross-examination; no real dispute exists; transaction is collusive to defeat decree.
Respondent: The amount was already paid to HT Media in 2012 for shares; entries are book entries with no underlying transaction; there is a real dispute requiring trial.
Ratio Decidendi
An acknowledgment of debt in balance sheets of both the debtor and the garnishee constitutes an admission of liability, and the garnishee must raise a real dispute to avoid attachment under Order XXI Rules 46 and 46A CPC. A circuitous and collusive transaction between related parties does not create a real dispute under Rule 46-C.
Judgment Excerpts
This Interim Application filed by the Judgment Creditor inter alia seeks an order and direction against the Respondent, who is stated to be a Garnishee owing Rs. 17,40,82,984/- to the Judgment Debtor, of attachment and of deposit of the said amount in this Court under Order XXI Rules 46 and 46-A of the Code of Civil Procedure, 1908.
Mr. Bharucha has relied upon the decision of the Hon’ble Supreme Court in the case of Asset Reconstruction Company (India) Limited Vs. Bishal Jaiswal and Anr. and in particular refers to paragraph 20 of the said decision which refers to the decision of the Calcutta High Court in the case of Bengal Silk Mills Co. Vs. Ismail Golam Hossain Ariff where it has been held that an acknowledgment of liability that is made in the balance sheet can amount to an acknowledgment of debt.
Mr. Bharucha submits that it is only where the garnishee disputes liability that the Court may order that any issue or question necessary for the determination of liability shall be tried as if it were an issue in a suit.
Procedural History
Decree dated 10th September 2018 in favor of Applicant against Judgment Debtor. Applicant filed Commercial Execution Application No. 849 of 2019. On 11th March 2020, Court directed Judgment Debtor not to dispose of assets. Judgment Debtor filed disclosure affidavits on 22nd June 2020 and 8th March 2021. On 1st September 2021, Director Mr. Rajesh Duggal was cross-examined and admitted the debt. Applicant filed Interim Application No. 3099 of 2021 seeking garnishee order. Respondent filed reply. Heard on 11th November 2024.
Acts & Sections
- Code of Civil Procedure, 1908 (CPC): Order XXI Rules 46, 46A, 46C; Section 51
